N.Z., Australian Dollars Headed for Weekly Gain


The New Zealand and Australian dollars headed for a weekly gain on rising commodity prices and prospects for a prolonged U.S. economic slowdown that may prompt the Federal Reserve to delay raising interest rates.

The currencies climbed the most in almost a week in Asian trading as commodities were poised for their biggest five-day gain in 33 years, improving the outlook for the South Pacific economies. New Zealand's dollar advanced for a second day as traders pared bets that the Reserve Bank of New Zealand will lower borrowing costs in coming months.

New Zealand's dollar rose 1 percent, the most since Aug. 18, to 71.91 U.S. cents at 12:22 p.m. in Wellington from 71.15 cents late in Asia yesterday and 70.60 cents in New York on Aug. 15. It reached 72.17 cents, the highest since Aug. 7. The currency advanced 1 percent to 78.06 yen from 77.30 yen.

Australia's dollar climbed 1.1 percent, the most since Aug. 18, to 87.87 U.S. cents from 86.89 cents in Asia yesterday and 86.61 cents in New York late last week. It touched 88.14 cents, the strongest since Aug. 12. The currency gained 1 percent to 95.38 yen from 94.41 yen.

The Reuters/Jefferies CRB Index of 19 commodities rose 3.7 percent. A settlement today at that level would mark a 6.2 percent gain for the week, the most since July 1975.

The price of gold, Australia's third most-valuable commodity export, increased 2.9 percent yesterday. Raw materials account for 60 percent of Australia's exports and sales of commodities including lumber make up 70 percent of New Zealand's overseas shipments.

The U.S. dollar fell after the New York-based Conference Board said yesterday that its index of leading economic indicators dropped by the most since August 2007, adding to signs that the slowdown in the world's biggest economy will deepen in the second half.

Fed funds futures on the Chicago Board of Trade show a 10 percent chance that the Fed will raise the 2 percent overnight lending rate between banks by a quarter-percentage point at its September meeting, down from 14 percent a week ago.


TradingEconomics.com, Bloomberg
8/21/2008 7:00:44 PM